Enforcement agencies such as the National Enforcement Unit (NEU) of the Ministry of Economic Development (MED), the Serious Fraud Office (SFO), the judiciary (the Courts/Justice system) and the Overseas Investment Office (OIO), all play a key role in upholding community standards, prescribed in law, promoting and serving the “public good” and advancing the welfare of New Zealanders.
The following is a case study that raises a number of pertinent questions about the role of the above agencies in upholding community standards. The spiritual, social and economic welfare of the public suffers when fraud, corruption and exploitation of the economically vulnerable is allowed to go unchecked.
On 21 October 2010 the SFO commenced a part I investigation into the financial transactions between Hong Kong-based Natural Dairy (NZ) Holdings Ltd and three NZ registered companies directed by Ms May Yan Wang: namely UBNZ Trustee Ltd, UBNZ Assets Holdings Ltd and UBNZ Funds Management Ltd. The focus is the involvement of these companies in the purchase of 16 dairy farms formerly owned by the Crafter family company that was put into receivership on 5 October 2009. Ms Wang, a Shanghai-born businesswoman who has New Zealand citizenship, has recently enjoyed a high profile as the front person for Natural Dairy, a foreign-owned company that is registered in the Cayman Islands. Its group of Chinese investors are bidding to buy $1.5 billion of dairy farms in New Zealand, including the 9,000 hectares of North Island Crafar family farmland, now in receivership with KordaMentha.
UBNZ Funds Management Ltd, directed by Wang and wholly owned by UBNZ Trustees Ltd, which she owns and directs, purchased four of the Crafar dairy farms in February 2010 from the receivers. Simultaneously they were purchased by UBNZ Assets Holding Ltd, also directed by Wang and 20% owned by Natural Dairy. (The remaining 80% is owned by UBNZ Trustees Ltd).
Wang, as the front person for Natural Dairy, is poised to purchase an additional 16 Crafar farms held by the receiver.
Wang failed to get approval by the Overseas Investment Office [OIO] for the purchase of the four farms by “an associate of an overseas person” (the “overseas Person” being Natural Dairy and the “associate Person” being the vendor UBNZ Assets Holding Ltd which she directs). Approval for each of the sales was required under the Overseas Investment Act 2005.
The Liquidation of Wang’s Dynasty Group and Court action
According to Nick Malarao a lawyer from the IRD, Ms Wang failed to reveal to her creditors from that the collapse of the Dynasty Group, of which she was a director/shareholder, that she was director/shareholder of four British Virgin Islands-registered companies and that she still faces three Companies Act charges in the Auckland District Court, two of which carry a jail term of up to two years. These charges relate to the Auckland High Court directed liquidation of the hotel and property investment group, Dynasty Group Ltd, that she co-directed. It was put into liquidation 3 October 2008 owing creditors $22 million.
Wang formed Dynasty Group on 1 September 2005 with Robert James Reece, a builder, who was recently disqualified from being a company director for five years. Both Wang and Reece served as directors from that time onwards – Reece resigning on 18 April 2008 and Wang resigning on 29 May 2008. Both owned 50% of the company shares.
Just prior to the company collapsing due to debt, Wang appointed Noel Johnson as a replacement director commencing 28 May 2008. He says he understood that the arrangement was “temporary” and that the effective control of the company remained in the hands of Wang. Within four months of his appointment the company was forced into liquidation by the High Court.
Ms Wang was required to attend the liquidator’s office for a formal examination on 13th October 2008 but failed to attend. Enquiries established that she bought a one-way ticket for Hong Kong on Friday 10 October 2008.
On 28 April 2010 she was remanded on bail to re-appear in the Auckland District Court to face three charges under the Commerce Act relating to the Dynasty Group collapse.
On 27 July 2010 she failed to appear in court. Through her lawyer Paul Sills, she pleaded not guilty to a charge of failing to keep proper books and records, one of failing to provide information to the liquidator and one of leaving New Zealand without advising the liquidator.
On 14 October she failed to appear in court. Through her lawyer she sought a discharge without conviction under s. 106 of the Sentencing Act 2002 but the Ministry of Economic Development strongly opposed this on the basis that she intends to remain in business. If convicted of at least one of the charges she is liable at sentencing to face imprisonment for up to a year.
2 November. Four days set down for bankruptcy proceedings brought against Wang by creditors IRD and Westpac. Judge reserves decision on 9 November.
2 December – Wang faces a full trial at a scheduled full day defended hearing on three charges laid against her by MED. It is expected that another half-day will be required to complete this – to be scheduled for the new year.
Bankrupting Ms Wang: A solution to a problem?
On Monday 9 November IRD lawyer Nick Malarao told the High Court at Auckland that bankrupting Ms Wang would minimise the risk of further detriment to the commercial community.
“Ms Wang is a risk to the integrity of New Zealand’s tax system,” he told associate Judge Hannah Sargisson.
Mr Malaroa said the Official Assignee could also possibly investigate her trusts and parties related to her, which could uncover assets and, therefore, unsecured creditors such as the IRD would receive more from Ms Wang’s bankrupt estate than the current repayment proposal of 6.5 c in the dollar.
Ms Wang is trying to get her debtor’s proposal approved by the court to avert bankruptcy. If bankrupted it will probably mean the end of her bid on behalf of Natural Dairy to buy 16 Crafar family farms from the receiver. She may also face criminal charges under the Overseas Investment Act for failing to get OIO approval for the purchase of four Crafar farms.
Advancing the foreign purchase of Crafer farmland.
Managers have been running the four ex-Crafar farms that UBNZ Assets Holding Ltd purchased in February 2010. The money for the four farms came from the sale of 20 per cent of UBNZ Trustee to Natural Dairy, her lawyer ‘minder’ Kerry Knight has explained in a rare interview with Wang with the Dominion Post. (Ms Wang is a director of the UBNZ group of companies and is fronting a $213.2 million bid to take ownership of dairy properties on behalf of Hong Kong-listed and Cayman Islands-registered company Natural Dairy).
Ms Wang can’t repay Dynasty’s creditors with any of the proceeds from the dairy ventures because the money is held in UBNZ Trust, set up by UBNZ Trustee Company. Ms Wang is not a trust beneficiary, Mr Knight says, nor does she control any of the trust money. The trust is run be an “appointer”, Auckland-based Wu Yun, who is a friend of Ms Wang’s.
If the OIO consents to the Natural Dairy-UBNZ [Wang vehicle] application to invest in 16 Crafar farms held by the receiver, the deal is conditional on Natural Dairy immediately paying the receiver the full purchase price that is stated in the court documents as $213.2m plus stock and valuation.
Simultaneously, Natural Dairy and Wang’s UBNZ Trustee Company (that owns UNNZ Funds Management and 80% of UBNZ Assets Holding) will secure the $500m deal – the total value of the 16 farms using a price-earnings ratio multiplier calculation. This will involve Wang’s UBS Funds Management company on-selling the Crafar farms to its associated company UBNZ Trustees Ltd of which Natural Dairy bought 20 per cent from Wang. Natural Dairy will then buy the remaining 80% of UBNZ Trustee from Ms Wang.
If bankruptcy proceedings do not proceed against Ms Wang, she will be free to pursue her Natural Dairy’s bid to purchase the Crafar farms. She may succeed provided the findings of the Overseas Investment Office and the Serious Fraud Office Investigations do not bring it to an end.
Several important points in law relating to the interpretation of the Overseas Investment Act 2005 will no doubt be clarified in this case, whether or not charges are laid against Ms Wang under the Act.
A Crying Shame. (May Wang interviewed by Andrea Fox). The Dominion Post. Business Day pp. B1 & B3 Saturday Nov 6, 2010.
Bankruptcy ‘in the public interest’, by Nick Krause. The Dominion Post. Business Day. Tuesday, November 9, 2010 p. C2.
Wang still faces criminal charges, by Nick Krause – BusinessDay.co.nz